International VAT

As an ecommerce systems provider, VAT is always an “interesting” subject of debate. A client recently asked me to enable the ecommerce system to charge VAT at the VAT rate in the purchasing EU state, and not at the UK rate where they are based.

I know there has been talk about going down this route in the 2005 VAT proposals documents, but as yet this is not law. I spoke to the VAT people on the HMRC help-line today and they confirmed that VAT works as follows:

1. You charge VAT at the rate in your country
2. If you are supplying outside the EU and have proof of export, the VAT rate is 0%
3. If you are supplying inside the EU and have the VAT number of the purchaser, the VAT rate is 0%
4. If you are supplying insite the EU and you don’t have the VAT number of the purchaser, VAT is at the standard rate

UK standard rate VAT is either 0%, 5% or (most usually) 17.5%.

If you need to check if the VAT number supplied by a purchaser is valid, there is a handy tool on the European Tax website: http://ec.europa.eu/taxation_customs/vies/en/vieshome.htm